An irreverent Wall Street Blog
Harbour and Geneos Customers Win FINRA Arbitration Against Stockbroker
September 19, 2017
Two public customers were
angered by the misconduct of their servicing stockbroker and what they
perceived to be the negligent oversight of his employers. As is often the case
with such unhappiness, the customers sued and their case was adjudicated before
a FINRA Arbitration Panel. As BrokeAndBroker.com Blog
publisher Bill Singer, Esq. demonstrates, there is one level of content and
context provided in FINRA's Arbitration Decisions, but, if
you start asking questions and doing some research, you often find a whole
different level of content and context out there in the real world.
Should
FINRA's Decisions always disclose everything even remotely
relevant to a party's background? Frankly, as nice as that would be, it's just
not practical. Is there a reasonable standard by which arbitrators should
determine what should and should not be disclosed in their decisions? Again,
that's probably an elusive and subjective goal. Reasonable or not, elusive or
not, Bill Singer will continue to do what he does best -- the whole agent
provocateur thing. In his beloved role of FINRA gadfly, Bill presents us with a
seemingly mundane customer arbitration and then delivers some details not set
forth in the FINRA Arbitration Decision that will likely
widen your eyes and leave your mouth agape. Bill is available for all sorts of
parties and functions. Ask for his rates.
In a Financial Industry
Regulatory Authority ("FINRA") Arbitration Statement of Claim filed
in March 2015, public customer Claimants Izmirian and Ingwaldson asserted
breach of fiduciary duty, gross negligence, violations of federal and state
securities laws, respondeat superior, violation of the Minnesota Consumer
Protection Act, conversion, intentional infliction of emotional distress, and
money had and received. Claimants alleged
that:
[H]olt mismanaged their accounts, including the recommendation to purchase a Jackson Life Annuity, resulting in surrender costs from the liquidation of a Hartford Annuity. Claimants further alleged that Geneos and Harbour failed to properly supervise Holt, allowing Holt to steal Claimants' funds and provide false account statements to Claimants.
Claimants sought at least
$100,000 in compensatory damages plus punitive damages, interest, fees, and
costs. In the Matter of the FINRA Arbitration Between Peter Izmirian
and Sandra Ingwaldson, Claimants, vs. Harbour Investments,
LLC, Geneos Wealth Management, Inc., and Mark David Holt,
Respondents (FINRA Arbitration 15-00680, September
8, 2017).
Respondent Holt, who represented
himself pro se, and Respondent Harbour each generally denied the allegations
and asserted various affirmative defenses. Respondent Geneos did not submit an executed
Submission Agreement.
Settlements
Claimants settled
with Respondent Geneos in 2015 and Respondent Harbour in
2016.
Motions and
Hearings
In March 2016, Claimants
requested summary judgement against Respondent Holt and filed a Motion
for Default Proceedings against him, which the FINRA Arbitration
Panel denied. Thereafter, Respondent Holt filed Motions to
Dismiss, which the Panel denied.
In April 2016, the Claimants
filed a Motion to Convert the Default Judgment into a Motion
for Summary Judgment, to which Respondent Holt objected. The Panel
found that both Claimants and Respondent Holt had been deficient in
conducting discovery and other duties. The Panel denied the motions and ordered
Claimants to notify FINRA of their intent to continue their case. Claimants
requested the renewal of their Motion for Summary Judgement,
to Set Hearing Dates, and for Counsel to Appeal
Telephonically, all of which the Panel
denied.
The FINRA
Arbitration Panel scheduled a hearing to determine damages on June 13, 2017, at
which Respondent Hold did not appear. I'm not sure that I fully follow how we
went from the Panel's denial of what appeared to be all outstanding motions and
requests to a hearing of damages-only-determination but that's what seems to
have transpired. As noted in the FINRA Arbitration
Decision:
[H]olt was not present at the hearing, as he is currently incarcerated.At the final hearing on June 13, 2017, Arbitrator Ahlm did not appear. The parties present agreed on the record to proceed with the majority of the Panel.
Award
The FINRA
Arbitration Panel of the two remaining arbitrators found Respondent Holt liable
and ordered him to pay to:
Claimant Izmirian: $159,389.86 in compensatory damages with 6% interest until paid in fullplus $100,000 in punitive damages; andClaimant Ingwaldson: $118,255.74 in compensatory damages with 6% interest plus $100,000 in punitive damages.
Bill Singer's Comment
No . . . I did not present
today's case for its underlying allegations or fact pattern but as an
exposition of the procedural issues that often come up in such public customer
cases. As evidenced in this matter, parties often engage in extensive motion
practice, sometimes in good faith and sometimes as a war of attrition.
Similarly, Claimants and Respondents alike (and sometimes even arbitrators)
don't always show up or participate in the arbitration process. None of which
is necessarily intended as a criticism but all of which is meant to convey the
realities of lawsuits. Once you sue, it's rarely about straight lines and
accelerated movement; to the contrary, you find yourself engaged in detours,
delays, and foot-dragging.
According to FINRA's online
BrokerCheck records as of September 19, 2017, Holt was first
registered in 1998 and was employed by Harbour from August 2007 to August 2005,
by Geneos from August 2005 to February 2007, and, then again, by Harbour from
February 2007 to November 2013.
BrokerCheck
further discloses four final regulatory events; one criminal event; two pending
and three final customer disputes; two final terminations; and one pending
judgment/lien.
Under the heading "Customer
Dispute -- Award/ Judgment" on Holt's BrokerCheck
records, the Izmirian and Ingwaldson arbitration as set forth for FINRA Arbitration
Docket Number 15-00680 is disclosed as having been settled in 2016 by
Respondent Harbour for $125,000 and $50,000 payments. Under the heading of "Customer Dispute --
Settled," however, the same FINRA Arbitration Docket Number 15-00680 is
disclosed as having also settled in 2015 for $85,000. This discrepancy may be
attendant to the separate settlements by Respondent Harbour and Respondent
Geneos.
Holt's
BrokerCheck records also disclose a discharge on November 8,
2013, by Harbour after the firm was allegedly notified by a former customer
about some purported diversion of a check to payee Harbour.
As more fully set
forth In the
Matter of Mark D. Holt a/k/a Markd D. Holthusen (Order
Making Findings and Imposing Remedial Sanctions; '34 Act Rel. No.
80459; Invest. Adv. Act Rel. No. 4686; Admin. Proc. File No. 3-17685 / April
13, 2017), we learn that Holt was Barred from the industry
and from participating in penny-stock offerings. As more fully stated in the
SEC Order::
There are those supporters of the FINRA mandatory arbitration process who will find no fault with the lack of detail in the FINRA Arbitration Decision. Such a short-fall is dramatized by the further disclosures noted in my comments above. Those who defend the alternative dispute resolution process will argue that Holt's status as a lawyer, his history of customer complaints, his regulatory history, and his criminal history are not particularly relevant or germane to the customer disputes at issue. Okay, fine -- let's go with that. On the other hand, you must admit that the additional facts that I have presented in today's BrokeAndBroker.com Blog add content and context that places the customers' allegations in a very different light, one that I would suggest is rendered compelling by the additional color.1. From August 2005 to February 2007, Holt was a registered representative of Geneos Wealth Management, Inc., a dually-registered broker-dealer and investment adviser registered with the Commission. From February 2007 to November 2013, Holt was a registered representative of Harbour Investments, Inc., a dually-registered broker-dealer and investment adviser registered with the Commission. Holt, 47 years old, is currently incarcerated at the Federal Correctional Institution in Oxford, Wisconsin (BOP Registry No. 17865-041).2. On April 1, 2014, Holt pleaded guilty to one count of felony wire fraud in violation of Title 18 United States Code, Section 1343 before the United States District Court for the District of Minnesota, in United States v. Mark D. Holt, Crim. Information No. 14-CR-68. On August 14, 2014, a judgment in the criminal case was entered against Holt. He was sentenced to a prison term of 120 months followed by three years of supervised release and ordered to make restitution in the amount of $2,940,982.75.3. The count of the criminal information to which Holt pled guilty alleged, among other things, that from in or about September 2005 through January 12, 2014, Holt defrauded his customers to obtain their property and money. In particular, Holt knowingly caused an email communication to be transmitted in interstate commerce via servers in Texas to a client in Minnesota that would give the client access to false account statements. Holt represented to his brokerage clients that he would invest their funds in investment vehicles such as bond funds and mutual funds. Instead, Holt misappropriated their funds by depositing client checks into a bank account he controlled and using these funds to pay for personal and business expenses. In furtherance of his scheme, Holt lulled his clients into believing that he had purchased various investments for them by sending fraudulent Morningstar client summaries and creating online client accounts using Blue-leaf, a web-based portal, that displayed fraudulent account balances. Additionally, Holt made monthly payments to his clients that were intended to appear as interest or annuity payments.